That fear shook financial markets Monday as oil plunged again, dipping below $50 for the first time in more than five years. The drop prompted a big sell-off, not just among energy stocks, but across the entire stock market.
Stocks had already endured a weak open because of concerns that Greece could exit the euro, adding to worries about the poor outlook for growth in that region. As oil slid further, the stock selling accelerated, pushing the Standard & Poor’s 500 index to its biggest loss in months.
The S&P 500 index dropped 37.62 points, or 1.8 percent, to 2,020.58. That was the biggest one-day slump for the index since Oct. 9. The Dow Jones industrial average fell 331.34 points, or 1.9 percent, to 17,501.65. The Nasdaq composite fell 74.24 points, or 1.6 percent, to 4,652.57.
Energy stocks led the drop, plunging 4 percent, as the price of oil closed down $2.65 at $50.04 a barrel, after dipping below $50 during trading. But the declines were broad, and even airline stocks, usually a beneficiary of lower oil prices, ended the day lower.
Another area for concern is Europe.
Investors were already worried about the poor growth prospects in the euro region, and the impact on global growth. Now, they also have to contend with renewed speculation that Greece may exit the euro.
European stock markets slumped and the euro plunged against the dollar on reports that German Chancellor Angela Merkel no longer believes it would be too risky for the 19-member eurozone if Greece dropped out of the currency bloc. Elections in Greece this month could be won by the Syriza party, which wants to renegotiate the terms of the country’s international bailout, threatening its place in the euro group.
The currency was already under pressure from expectations that the European Central Bank will expand its monetary stimulus as the region’s economy struggles.
On Monday, the euro was trading at $1.1939 after falling to a five-year low of $1.1862.
In U.S. government bond trading, prices rose as investors moved to buy the safest assets. The yield on the benchmark 10-year Treasury note, which falls when prices rise, dropped to 2.04 percent.
Despite the increase in volatility, analysts are still confident in the outlook for growth in the U.S. and believe that the stock market will hand investors positive returns this year. Some even recommend adding to stock holdings when prices fall.
In metals trading, prices for precious and industrial metals ended mixed. Gold rose $17.80 to $1,204 an ounce, silver rose 45 cents to $16.21 an ounce and copper fell five cents to $2.77 a pound.
In other energy trading, Brent crude, a benchmark for international oils used by many U.S. refineries, fell $3.31, or 5.9 percent, to close at $53.11 a barrel in London.
In other futures trading on the NYMEX:
• Wholesale gasoline fell 5.2 cents to $1.381 a gallon.
• Heating oil fell 4.7 cents to close at $1.749 a gallon.
• Natural gas fell 12.1 cents to close at $2.882 per 1,000 cubic feet.